European Union governments have agreed a negotiating position that would let companies expanding oil and gas production appear in investment funds marketed as backing the green transition.
Ambassadors from the bloc’s member states signed off the Council of the European Union’s stance on the Sustainable Finance Disclosure Regulation (SFDR) on June 24, opening the way to talks with the European Parliament.
The move would loosen a proposal by the European Commission, which had sought to bar firms increasing the supply of coal, oil and gas from a new “transition” fund category. Funds labelled “sustainable” would have had to cut fossil fuel exposure entirely.
Under the Council’s text, companies active in the fossil fuel sector could instead qualify for the transition label if they put 20 per cent of capital spending into activities aligned with the EU’s green taxonomy and set a time-bound plan to cut operational emissions.
That plan would not have to cover emissions from the fuels these companies sell. Such emissions account for around 85 per cent of the sector’s carbon footprint, according to the International Energy Agency.
The Council also agreed to let managers of funds sold only to professional investors opt out of the new labelling rules altogether. The framework would replace the current system with three categories: sustainable, transition and ESG basics.
The SFDR has applied since 2021 and underpins the bloc’s sustainable finance rules tied to the European Green Deal. The market for funds making environmental or social claims exceeded €9 trillion by the end of 2024, according to industry body EFAMA.
Campaigners reacted angrily. WWF’s European Policy Office said the criteria were “built to cater to the commercial interests of a handful of fossil fuel giants”.
Reclaim Finance accused governments of bowing to lobbying by oil majors, singling out French energy group TotalEnergies. Parliament records show the company held about 35 meetings with MEPs between January and June, several referencing the SFDR review.
A Council spokesperson said firms with fossil fuel activities “can still play an important role in the green transition”, citing low-carbon fuels and electric vehicle charging.
The European Parliament has yet to fix its own stance, with a committee vote due on July 15. Negotiations between the two sides would follow once MEPs have agreed their position.
